Is the Housing Market on the Brink of a Crash or Boom in 2025?

The housing market is a hot topic right now, and for good reason. If you’re like me, you’re probably wondering whether we’re about to see a major crash or if the market will keep booming. The short answer is: neither a dramatic crash nor a huge boom is likely in the immediate future. Data suggests a more moderate path, with some areas seeing price increases while others might experience minor dips. Now, let’s dive deeper into what’s really going on and what you might expect.

Is the Housing Market on the Brink of a Crash or Boom in 2025?

It feels like just yesterday we were in the middle of a frantic buying frenzy, with prices soaring and homes flying off the market in days. Now, things are a bit different. I’ve been watching the market closely, and it’s clear that the rapid growth we saw a couple of years back is cooling down. But is cooling down the same as a crash? I don’t think so, and here is why.

What the Numbers Say

Let’s look at the latest data from credible sources. It is important to understand how the market is performing based on facts and not just speculations.

Federal Housing Finance Agency (FHFA) House Price Index: According to their report, U.S. house prices increased by 4.3 percent between the third quarter of 2023 and the third quarter of 2024. That might sound like a lot, but when you compare it to the huge jumps of previous years, it’s a definite slowdown. Also, they noted that house prices were up 0.7 percent compared to the second quarter of 2024, indicating that the growth is not uniform throughout the year and has significantly slowed down.

Time Period
Price Change

Q3 2023 – Q3 2024
4.3%

Q2 2024 – Q3 2024
0.7%

National Association of Realtors (NAR): In November 2024, existing-home sales climbed 4.8% compared to October and a significant 6.1% from a year earlier. The median existing-home price was $406,100, which is a 4.7% increase from November 2023. This means that while prices are still going up, the pace of the increase is not as fast as before, and sales are picking up.

Metric
Nov 2024
Change from Oct 2024
Change from Nov 2023

Existing-Home Sales (Annualized Rate)
4.15 million
+4.8%
+6.1%

Median Existing-Home Price
$406,100
–
+4.7%

Unsold Inventory (Months’ Supply)
3.8
-2.9%
+8.6%

CoreLogic: They report that, through October 2024, national home prices increased by 3.4% compared to October 2023. They also anticipate a 2.4% year-over-year increase from October 2024 to October 2025. This again indicates a moderate growth, and they predict that prices will reach a new peak by April 2025.

Time Period
Price Change

Oct 2023 – Oct 2024
3.4%

Oct 2024 (Forecast) – Oct 2025 (Forecast)
2.4%

Oct 2024 – Nov 2024 (Forecast)
-0.03%

The Housing Market “Boom” Argument

So, why would some people think we’re headed for a boom? Here are a few factors that could support that idea:

Low Inventory: Even though inventory is up from last year, the overall supply of homes for sale is still relatively low in many areas. This keeps upward pressure on prices.
Consistent Demand: Despite higher mortgage rates, there are still plenty of people looking to buy. Factors like job growth and changing life circumstances keep demand going. The National Association of Realtors notes that sales are picking up, with a 4.8% increase in November 2024 compared to the previous month, and a 6.1% increase compared to a year ago.
Regional Differences: The housing market isn’t monolithic. Areas in the Northeast are still seeing strong price growth. For example, New Jersey, Rhode Island, and New Hampshire had some of the highest year-over-year price gains. The FHFA also reports that the East North Central division had the strongest appreciation with a 6.8% increase from the third quarter of 2023 to the third quarter of 2024.

The Housing Market “Crash” Argument

Now, let’s look at the possibility of a crash:

Affordability Issues: Rising home prices coupled with higher mortgage rates are making it harder for many people to afford a home. This can put a limit on future price growth.
Cooling Demand: While demand is still there, it’s not as frenzied as it once was. We can see this in the CoreLogic report where month-over-month home prices only increased by 0.02% in October 2024 compared with September 2024.
Areas at Risk: CoreLogic has identified some metro areas that have a high probability of price decline over the next 12 months including: Provo-Orem, UT, Salt Lake City, UT; Atlanta-Sandy Springs-Rowsell, GA; Tucson, AZ; and Palm Bay-Titusville-Melbourne, FL.

Why I Think It’s Neither

After analyzing the data and observing the current market trends, here’s why I believe we’re not heading for a crash or boom:

Moderate Growth: The data consistently points to a slowing pace of price increases. Prices are still going up, but at a much more sustainable rate than before. CoreLogic’s forecast predicts a 2.4% year-over-year increase from Oct 2024 to Oct 2025 which is a quite moderate number.
No Bubble Indicators: A major crash is usually preceded by a speculative bubble. While the market was overheated a couple of years back, that heat is steadily dissipating. Lending standards are also stricter than they were before the 2008 crash.
Gradual Shift: I see a gradual shift towards a more balanced market. Sellers aren’t having the same level of power that they had before, and buyers are regaining some leverage.
Regional Variations : The fact that some areas are still doing well while others are showing signs of slowdown, confirms that it won’t be a uniform boom or crash, but a more localized trend.

My Thoughts on the Future

Personally, I think we’re entering a new phase of the housing market. It’s not going to be as crazy as it was a couple of years back, but it won’t be a dramatic fall either. Here are some key takeaways:

Don’t Expect Big Jumps: If you’re hoping for another year of double-digit price increases, you’re likely to be disappointed. We’re going to see more moderate, single-digit growth in most areas. The data from FHFA, NAR and CoreLogic corroborates this.
Be Smart If You’re Buying: This is a good time to buy a home if you are prepared and financially secure. Take your time to compare and find the right property and neighborhood and do your due diligence.
Location Matters: The market is not uniform. What’s happening in New Jersey may be very different from what’s happening in Florida. Pay attention to your local market trends.
Consider Long-Term: Housing is generally a good long-term investment. If you’re planning to stay put for a while, the current market offers reasonable options.

The Bottom Line

The housing market is definitely changing, but it’s not in a state of collapse or explosive growth. Instead, we are seeing a gradual shift towards a more stable and balanced environment. Prices are still rising but at a slower pace, and while demand remains, it is less frantic. It’s essential to stay informed, do your research, and make decisions that align with your individual circumstances and goals. I am optimistic that the housing market will find a stable and sustainable ground for the coming times.